Correcting Stats for Inflation CHAPTER 13 SECTION 2
Cost of a new home: $89, Median Income: $20, Cost of a first-class stamp: $0.20 Gallon of regular gas: $1.24 Cost of a dozen eggs: $0.86 Cost of a gallon of Milk: $ Cost of a new home: $158, Median Household Income: $34, Cost of a first-class stamp: $0.32 Cost of a gallon of regular gas: $1.15 Cost of a dozen eggs: $1.16 Cost of a gallon of Milk: $
Cost of a new home: $158, Median Household Income: $34, Cost of a first-class stamp: $0.32 Cost of a gallon of regular gas: $1.15 Cost of a dozen eggs: $1.16 Cost of a gallon of Milk: $2.96 Cost of a new home: $202,100 Median Household Income: $40,925 Cost of a first-class stamp: $0.44 Cost of a gallon of regular gas: $3.89 Cost of a dozen eggs: $1.25 Cost of a gallon of Milk: $
Prolonged rise in the general price level of final goods and services. Inflation decreases the Purchasing Power of the dollar. Value of the dollar is lower. INFLATION
Prolonged decline in the general price level of goods and services. Not as common as inflation DEFLATION
Consumer Price Index (CPI) Producer Price Index (PPI) Real GDP MEASURES OF INFLATION
Measure of the average prices of a specified set of goods and services purchased by typical consumers in city areas. In simple terms – Average change in prices from month to month CONSUMER PRICE INDEX (CPI)
Market Basket – Representative sample of goods and services used to calculate the CPI 80,000 specific goods and services (food, housing, clothing, etc) Updated every 10 years Base Year – Year used as a point of comparison CPI (CONT.)
Measure of the change in price over time that U.S. producers charge for their goods and services. Price change of wholesale goods Changes in the PPI hint to changes in consumer prices (IE – The price you pay for goods) PRODUCER PRICE INDEX (PPI)
GDP that has been adjusted for inflation - Base year for Real GDP is the year 2000 GDP Price Deflator - Removes the effects of inflation from GDP GDP inaccurate without figuring in for inflation. REAL GDP